Posted - September 20, 2013 - By Oleg Vukmanovic and Muriel Boselli -
(Additional reporting by Michel Rose; Editing by Henning
Gloystein and Dale Hudson) - Reuters
Many European import
terminals for shipped gas may have to be idled because of
falling deliveries unless they try their hands at alternative
businesses such as ship-fuelling stations.
Terminal operators across Europe have seen deliveries of
liquefied natural gas (LNG) drop over the past year as Asian and
South American buyers are willing to pay more to meet surging
demand.
"European LNG deliveries will drop by 24 percent in 2013,
which comes in addition to a 30 percent fall in 2012," said
Thierry Bros, senior gas and LNG analyst at Societe Generale.
Adding to the trouble is that many import terminals,
especially in continental Europe, are under take-or-pay
contracts that force them to accept LNG deliveries even when
demand is not there or pay stiff fines.
As a result of such contractual obligations and slack
demand, more than a tenth of Europe's LNG is currently loaded
back onto tankers for onward transport to higher-paying markets
in Latin America or Asia, tripling to 3.8 billion cubic metres
(bcm) between 2011 and 2012.
"Everything that brings more flexibility to the LNG shipping
chain is vital," said Jean-Marc Guyau, who heads France's LNG
terminal operator Elengy.
One option to deal with lower demand is simply to idle
capacity, but this comes at a high price.
Spanish imports nearly halved in the January-June period
compared with two years ago, to just 5.6 million tonnes.
The resulting strain from low utilisation led Spanish grid
operator Enagas to mothball its 7 bcm/year El Musel import
terminal directly after the facility's completion last year.
In Spain, which has Europe's biggest LNG import capacity,
the financial burden of running idle terminals falls on the
state, while traders can take advantage of high Asian and Latin
American prices by re-exporting cargoes at record rates.
European LNG import prices are around $10 per million
British thermal units (mmBtu), while Asian and Latin American
customers pay more than $15 per mmBtu.
There are also problems in France, with utilisation at the
Montoir LNG terminal standing at just 12 percent - leading to
high maintenance costs for relatively few LNG cargos.
ALTERNATIVES SOUGHT
One alternative that some operators are eying but that is
still in its infancy is ship-to-ship transfers of LNG, which
would speed up re-exports and has been tested at Montoir.
The French port of Dunkirk and Belgium's Zeebrugge have been
shortlisted by Russia's Arctic Yamal LNG project to find a
facility where its LNG can be transferred from ice-class tankers
to conventional LNG vessels.
To address the problems, some operators are also seeking
help from Qatar, the world's biggest LNG exporter, which is in
talks with several European terminal operators to buy import
capacity as an insurance policy in case demand in Asia drops.
These so-called put-option deals would give Qatar the right,
but not the obligation, to deliver LNG to Europe, acting as a
hedge if Asian demand falls as a result of lower Asian gas usage
or rising competition from new suppliers such as Australia.
Talks are being held with importers at the Dutch Gate
terminal, where deliveries have hit rock-bottom.
Qatargas has also signed a five-year agreement to supply
over a million tonnes of LNG a year to Petronas in Britain,
and traders say this may be the first put-option deal agreed.
Another alternative for terminals is LNG as ship fuel.
The Gate terminal is spearheading efforts to become Europe's
top ship-fuelling port in response to fading deliveries and
maritime rules that will take effect from 2015 aimed at boosting
the attractiveness of shifting from oil to cleaner natural gas
as a shipping fuel.
Gate received its first LNG shipment from Skangass'
small-scale LNG plant in Norway's Risavika in July, followed by
two more since. The cargos will be reloaded onto vessels and
head to Sweden's Nynashamn terminal, where they will be broken
into smaller parcels to power ferries, trucks and industrial
customers.
"The shipping industry understands it will have to learn how
to use LNG," said Thierry Chanteraud, of Total Marine Energy.
The Netherlands expects the business of LNG for transport to
generate 2.7 billion euros ($3.7 billion) for the country by
2030.
($1 = 0.7384 euros)
Post to be found at:
http://in.reuters.com/article/2013/09/20/energy-lng-europe-idINL5N0HF3KD20130920
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